Onthe one hand, Trump’s weak dollar policy is regarded as a positive factor forthe U.S. stock market, especially for transnational corporations that selltheir products overseas. A weaker dollar makes U.
S. goods cheaper for foreignbuyers. A weaker dollar and low-interestrate environment have a positive effecton Trump’s expansionary fiscal policy and promotion of export growth. At theWorld Economic Forum in Davos, Switzerland, U.S. Treasury Secretary StevenMnuchin saying “a weaker dollar is good for trade.
” On the other hand, theweaker dollar could hurt the stock market if the inflationary impact of afalling dollar causes damage to the bond markets, pushing up the yield on USTreasuries. The yields and prices of bonds are in the opposite direction.Whatis more, weaker dollar’s policy will decline in the international currencystatus and the weaker dollar has brought the United States the growing risk ofinflation, as well as the growing government budget deficit, irreparable savings-investment gap. Conversely, a strong dollar makesimported goods cheaper, which is good for boosting American consumption. At thesame time, the strong dollar makes global investors more willing to returnoverseas businesses and capital to the United States. So the strong dollar ismore favorable to attracting foreign capital inflows.
In addition, the strongU.S. dollar can keep U.S. Treasury foreign borrowing costs low.
This means thatwhen the United States lends more money or extends its existing debt, the U.S.government spends less on interest than the dollar. Lower interest rates alsoallow consumers to enjoy cheaper mortgages or other loans. What is more, thestrong U.S. dollar is necessary to maintain the status of U.
S. global hegemony.This is the prerequisite and safeguardsfor the survival of the United States, especially under the current heavy debtsituation.
The dollar is an important symbol of the strength and status of theUnited States. US dollar hegemony is one of the main support points for the globalhegemony of the United States. The hegemony of the U.S. dollar has enabled theUnited States to impose a large-scale international seigniorage.
At present,the global economy is still dominated by the U.S. dollar. The U.S. dollarremains the major currency in global foreign exchange reserves, foreign trade settlement, and foreign exchange settlement.The hegemony of the U.S.
dollar allows the United States to maintain a hugetrade deficit for a long time without any economic impact. US dollar hegemony enablesthe United States Get cheap products and services from around the world. However,a strong dollar means that the goods and services produced and delivered by theUnited States are more expensive than those in other countries. Of course, thiswill be detrimental to the United States’ exports, while if there is a bigdeficit in exports, it will contain the U.S. economic recovery and employment.